Category: Insights

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

• Both revenue and EBITDA valuation multiples fell for nearly all US software categories in Q1 2021, stalling the strong recovery and advance shown in the second half of 2020. In Europe and the UK, valuation metrics continue to increase, the exception being European EBITDA multiples which have fallen 18%.
• Revenue multiples for US Vertical, Horizontal and SaaS application software companies have all fallen in Q1 but remain at or above pre- pandemic highs. In contrast, median revenue multiples for UK Small & Mid and European software companies have continued to increase and are now both above pre-COVID levels for the first time.
• EBITDA multiples fell significantly in the middle of Q1 for US companies. US Horizontal recovered by the end of March for a median multiple of 40x, now well above SaaS and Vertical multiples of 29x and 26x.EBITDA margins remained stable across most categories, whereas forecast annual revenue growth increased significantly for all.
• In the Enterprise Value Index, all sub sectors increased or remained constant from Q4’20.However, towards the end of the quarter four of the five verticals showed a downward move, with FinTech as the only exception.HR Tech continues to outperform other sub sectors, although it showed the largest fall of any vertical from February to March.

Silverpeak Benchmark Report Q1 2021

Silverpeak has updated its research into Series B & C round in European Tech Companies.

Key takeaways:

• Series B&C VC investment in European tech companies reaches a new high in 2020 with investment totalling €4.5B, an increase of 37%
• General trend towards larger rounds, with a tripling to 15% of B rounds above €50m and 40% of C rounds above €50m
• The UK still dominates as the destination of capital, and grew 42% in 2020 vs 2019
• The Nordic region shows a strong presence in B rounds with the region recording a 120% increase in capital invested on a 20% increase in deal count compared to 2019
• The largest B rounds were dominated by companies from the UK, producing 6 out of the top 10 largest rounds in 2020
• H2 2020 had 4 out of the 10 largest C rounds since 2016

Paddy MccGwire, Managing Partner, commented that “The European capital market for private companies has never been so strong, with a 37% surge of B &C round capital invested in 2020.”

Silverpeak – B&C Rounds Research April 2021

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

 Report highlights

• Both revenue & EBITDA multiples have continued to bounce back significantly. All categories now record both revenue and EBITDA multiples which exceed the 24- month average, with 6 of the 10 multiples reaching record levels.

• US application software median revenue multiples continue to chart new all-time highs in Q4’20. US Horizontal recorded the lowest growth in revenue multiple across all categories of 10.5%. For the first time since mid-2018, US Horizontal revenue multiples are now lower than US Vertical multiples, despite recording the largest increase in its forecast annual revenue growth from 7% to 11%.

• EBITDA multiples for the US Horizontal, Europe and UK Small & Mid have reached the highest levels on record. US SaaS and US Vertical EBITDA multiples recover strongly, though remain below their peak. However, the median EBITDA margin has not changed significantly in Q4 for any categories.

• HR Tech continues to outperform other sub sectors in our Enterprise Value index, despite signs of downward trend at the start of the quarter. The 5 subsectors all increased at varying levels across the quarter, finishing at high points with the exception of FinTech which is still below its January 2019 level.

If you would like to discuss this report further please contact:

 Paddy MccGwire
pm@silverpeakib.com

 

Silverpeak Benchmark Report Q4 2020

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

• In contrast UK Small & Mid revenue multiples, which are now below Europe, are still down 40% Y.o.Y. while its median forecast annual revenue growth saw a significant decrease of two thirds to 1.7%.
• European revenue and EBITDA multiples look to have both recovered strongly in Q3. There was an uplift of 31% in the median EBITDA multiple in Europe to 20x, exceeding the 24-month average. Europe also showed the largest relative increase in median forecast revenue growth increasing to 7.5%.
• EBITDA multiples have increased to levels above the 24-month average for US Horizontal, Europe and UK Small & Mid. US SaaS and US Vertical EBITDA multiples are well below their peak, but were constant Q.o.Q, The median EBITDA margin has not changed significantly in Q3 for any category.
• HR Tech continues to outperform other sub-sectors in our Enterprise Value growth index. Other subsectors remained stable across the quarter, but median values showed signs of a downward trend in September.

Silverpeak Benchmark Report Q3 2020

Cross-border M&A activity plummets in Q2 but strategic deals complete
Although Q2 transaction numbers collapsed, as many transactions were initially frozen or terminated entirely, Silverpeak has seen activity in the market begin to rebound with a number of highly strategic transactions announced in June. The SITS market, in particular, has been seen as robust and a beneficiary of any long-term impact of COVID-19, as reflected by the share prices of SITS businesses recovering strongly in the public markets and already returning to pre-COVID-19 levels.

Strategic M&A transactions remain resilient
Despite the fall in M&A activity, completed transactions in Q2 appear to be those with strong underlying strategic rationale. Perhaps the most notable transaction in UK SITS was the acquisition of London-based Eggplant, by NYSE-listed Keysight Technologies, in a deal valued at $330m. Keysight is seeking to build out a testing software portfolio of high-quality recurring revenue, to complement its existing testing hardware business. The transaction is rumoured to have taken place at a valuation of c. 10x Eggplant’s 2019 revenues.

IPOs surprisingly robust
Despite a fairly poor volume of European IPOs in 2019, there has since been an uptick in the first half of 2020. The highlight in the European SITS market was the $200m+ IPO of Pexip, a video conferencing service and Zoom competitor that could only be described as a “COVID-19 beneficiary”. While the remainder of 2020 remains uncertain, with the highly unpleasant combination of winter flu and COVID-19 resurgence on the horizon, there continues to be a stream of announcements of major upcoming SITS IPOs – especially in the US.

IndustryViews Corporate Activity Q2 2020 270720

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

• Both revenue & EBITDA multiples have bounced back significantly but comparing Q2 multiples to the 30-month average, only US Horizontal exceeds both revenue and EBITDA 30-month average, with US Vertical exceeding just the revenue multiple.
• US Vertical revenue multiples rocket 54% to 6.2x, however still remains lower than US SaaS and US Horizontal which recovered at c.27%, similar to Europe. UK Small & Mid Cap experienced the slowest recovery, with revenue multiples gaining only 5.5% during Q2.
• EBITDA multiples rise for all categories except UK Small & Mid Cap which still remain at Q4 2018 levels. US Horizontal EBITDA multiples are higher than US SaaS for only the second quarter since mid-2017. However, all EBITDA multiples remain lower Y.o.Y and there has been little change in the median EBITDA margin during Q2.
• HR Tech subsector is the clear winner in our Enterprise Value growth index due to the new ‘work from home and office’ environment. Median forecast annual revenue growth continued to contract for all categories, with UK Small & Mid Cap worst affected, reducing by a half to 5.9%.

Silverpeak Benchmark Report Q2_2020

We are issuing this interim April report due to the dramatic decline and recovery in multiples over the last 3 months. We have added additional chart showing the SaaS multiples split by 75^th, and 25^th percentile, mean and median which illustrates the spread of SaaS performance.  For this update the charts are just from 1 January 2019 to 30 April 2020.

Report highlights

• From the low point to 30 April, Median Revenue multiples for US Vertical and Europe recovered 70% of the loss, US SaaS and Horizontal 60%, and UK 50%.
• Many software sub-sectors are seen to be behaving in a resilient way to COVID-era trading. US Horizontal EBITDA multiples recovered to near pre-COVID levels.
• The SaaS chart shows how the 75th percentile revenue multiple was the biggest faller in Q1 at 3.9x to near the Mean, and now has recovered 2.5x of the loss to 9.7x. Quality is still rewarded with 75th percentile multiple almost 200% of the 25th percentile 5x, which is 1.9x below Median. However, both recovered the same 63% of their loss to 30 April

Silverpeak Benchmark Report FLASH APRIL 2020 UPDATE

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

This quarter, we’ve also created a COVID-19 index, analysing its impact on the Enterprise Value of various sub-sectors within our data set.

Report highlights

• The unprecedented COVID-19 pandemic has resulted in a U-turn of last quarter’s growing revenue multiples, which has also amplified the decline of EBITDA multiples across all categories. Europe, UK Small & Mid and US Vertical revenue multiples have all sunk to pre-2015 levels.
• US Horizontal revenue multiples have fallen dramatically since their immense growth of 22% last quarter. But, for the first time since mid-2017, US Horizontal EBITDA multiples are now higher than US SaaS multiples, despite having a 3% lower median EBITDA margin.
• US SaaS revenue multiples have crashed by 28%, to a similar level to Q2 2017, despite only a 1% decline in forecast revenue. In practice, most revenue guidance has been suspended. The multiples fall was amplified for EBITDA multiples, where they now lie at 23.7x, plummeting 40% since last quarter.
• Proportionate falls in revenue multiples have been greatest in the US. However, reduction in forecast growth is greatest for UK Small & Mid and Europe, both reducing by 1/3 to c.10%.

Silverpeak Benchmark Report Q1_2020

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Starting this quarter, we have included a snapshot on European software M&A.

Report highlights

• US SaaS revenue multiples were predicted to continue their descent from Q3, however, they rebounded from a 7.7x trough to end the quarter at 8.2x. Contrastingly, EBITDA multiples have continued to fall, reaching a low of 35.6x in H2 2019 from their H1 peak of 44.0x.
• US Horizontal revenue multiples have done a U-turn since last quarter’s 11% fall; increasing 22.3% to 6.9x.
• UK Small & Mid EBITDA multiples have shot up 3.3x to 19.6x. They look on course to match their historical peak of 22.0x in H2 2018. Furthermore, their median forecast annual revenue growth has doubled since last quarter, showing positive signs for these companies, despite the recent political events surrounding Brexit.
• European revenue multiples were the only ones to fall in Q4. However, they have had the strongest growth in EBITDA margin (+4.9%) out of all the categories.

Silverpeak Benchmark Report Q4_2019